Sometimes I feel like Congress is the bully on the school playground. They make all the rules and tell everyone how to play the game they want to play. They give out great toys, our military benefits, but they constantly taunt us saying they’ll take them away.

Military families want Congress to play fair.

When they promise us something, we expect them to live up to it.

What do you think? Is Congress being a bully to military families?

Every year Congress looks at military spending. They question how to save the government money. Military benefits are put on the chopping block every time. Think about the benefits you or your service member were promised when enlisting.

Are you getting everything you were promised? Probably not.

I’ve been part of the military community my entire life. My parents were both in the Army and my husband is in the Navy. I have seen firsthand how Congress plays. I read the transcripts from subcommittees that debate changes to military benefits.

I pay close attention to the wording of bills I follow to see how they progress through the Senate and the House. Not many people do, which is why I enjoy writing about what Congress is doing in regards to changes that affect military families.

I want you to know what is going on so you aren’t blindsided.

So many changes have occurred recently. Have you kept up with what Congress is doing or have you been thrown a curve when you’ve needed a benefit?

Tricare had significant changes start on January 1, 2018, for example. Did you know that while Tricare Prime remained the same, Tricare Standard and Tricare Extra merged to become Tricare Select? A significant part of the change is that beneficiaries will no longer be able to switch between Tricare plans at any time. There will now be an open enrollment window. Life events will continue to enable you to switch however.

I’m sure you know that we got a pay raise this year. That’s one thing military families keep track of. There are some important things to consider though. Congress isn’t necessarily giving away extra money without caveats. You might want to read up on BAH rates for locations you are considering for your next PCS. Rates have gone up, slightly, in some locations and down in others.

Did you know that Congress wants military families to start covering 5% of BAH starting as early as next year?

Military retirement changed on January 1 as well. Congress made the most significant change to military retirement pensions in 70 years. The old plan, known as the legacy retirement system, stayed the same. A new retirement program known as the blended retirement system allows incoming service members to basically set aside money that is matched by the government up to a point. They will no longer be required to stay in the set 20 years to earn a retirement benefit.

The post-9/11 GI Bill also changed. Previously there was a 15-year cutoff date to use or lose the benefit after a service member left the military, if they left after 2013. That was eliminated. Reservists will now see their benefits increased. Surviving dependents and Purple Heart recipients get better benefits as well. A great thing is that those who attended a college that closed in 2015 or later, who ended up losing their money, will now get a new allotment.

These are just a few of the changes Congress sent our way already this year. It’s great that those entering the military will have some improvements to benefits such as the retirement plan and the post-9/11 GI Bill. Those that have been in for a while are excluded from many benefit improvements coming though. Tricare is a major benefit that many people joined the military for. That’s taking a big hit. Copays for medication increased. The dental plan changed, and not for the better, not to long ago. The commissary has changed so that prices fluctuate with the area.

In some ways it’s like Congress is making friends with the new kids and bullying their other classmates on the playground. The bully didn’t play favorites during the recent government shutdown though. Congress mandated that service members continue to work, even if they weren’t going to get paid. And our representatives didn’t lose money or sleep over this decision.

“GAO’s analysis found that DoD’s report fully addresses three of the seven mandated elements and partially addresses the remaining four. Although DOD’s report discusses the seven mandated elements, GAO found that including additional information would have made the report more consistent with relevant generally accepted research standards and would have made the report more useful to decision makers,” the GAO report stated.

More useful to decision makers? Wait…what?

Let’s take a step back into the recent history of reports on cost-saving measures for the commissaries.

As commissary shoppers, we know that that DeCA operates the commissaries. Prices at the commissaries are product cost plus a 5 percent surcharge. In fiscal year 2015, DeCA’s annual sales for its commissaries were approximately $5.5 billion. DeCA received $1.3 billion in appropriated funds in fiscal year 2015 to operate the commissaries.

Those appropriated funds are currently under the microscope of the defense department.

The National Defense Authorization Act for Fiscal Year 2016 “mandated DoD to provide a comprehensive plan to achieve ‘budget neutrality,’ which DoD interpreted as ending the use of appropriated funding for commissaries and the military exchange system, by October 1, 2018,” as explained in the recent GAO report.

This mandate has caused a lot of head scratching and number crunching for those at both DoD and DeCA.

The Boston Consulting Group was contracted to conduct 2 separate studies that may lead to cost-saving measures. In February, DoD established the Defense Resale Business Optimization Board. This board is working to help implement reforms within and among the commissary and exchange systems.

Then DoD released its report saying budget neutrality will be difficult, if not, impossible. GAO then reviewed that DoD report as it was directed to in last year’s defense budget. That’s what lead to this report and GAO’s recommendation that “DoD provide information to Congress to support its conclusion about budget neutrality; develop a plan for achieving alternative reductions to appropriations; and identify specific metrics for customer satisfaction, product quality, and savings.”

“DoD did not provide a plan to achieve budget neutrality by October 2018 as mandated because according to the report, DoD cannot achieve budget neutrality without reducing savings to patrons or other benefits provided by commissaries and exchanges.”

“For example, the report stated that drastic changes, such as store closures and price increases, would have to be implemented if DOD were required to achieve budget neutrality. However, DOD did not provide additional information about potential steps to reach budget neutrality, such as cost estimates and assumptions, or include specific details about trade-offs, constraints and limitations to achieving budget neutrality such as reductions in benefits,” the GAO report said.

“Instead of providing a plan, DOD estimated a $2 billion reduction over a 5-year period, which would fall short of achieving budget neutrality by about $5 billion. DOD officials told us the cost savings amount was an arbitrary estimate, and that therefore DOD did not develop details on steps it would take to achieve the $2 billion in savings. DOD officials could not explain the assumptions, methodology, data, specific time frames or DOD efforts that would lead to the $2 billion in savings.”

In case you’re wondering why DoD didn’t conduct these types of detailed analysis in its initial report, DoD experts, who were interviewed by GAO investigators for this report, pointed to time constraints as their reason for the lack of specifics.

“According to DoD officials, for some efforts that are already being considered, DoD officials told us that they did not include some information in the report to support their conclusions because they have not had time to verify the information,” the GAO report said.

Here’s another important nugget of information: DoD concurs with GAO’s recommendations.

Now that we know that the decision makers aka Congress lack the information needed to make decisions about changes to the commissaries, what’s the next step?

I have a strong sense we’ll be reading another federal report in the near future.

What do you think of this GAO’s report saying that the DoD’s report on cost-saving measures for the commissaries was incomplete?

Share this:

Like this:

By now, if you have any connection to the military community you’ve likely heard some heated discussion and some of the rampant rumors about the possible closure of all CONUS commissaries.

An outside view the commissary located at Naval Station Norfolk. Source: U.S. Navy

In the Report on Plan to Obtain Budget Neutrality for the Defense Commissary System and the Military Exchange System dated May 2016, the Department of Defense reported to Congress details on the current sales and usage of the commissary system and explored options for reducing the $1.5 billion shortfall between projected costs and the revenue required to achieve budget neutrality by October 1, 2018. The report reiterated the DoD’s commitment to keeping both commissary and exchange services.

But perhaps the most surprising boost in the fight to keep our commissaries open came from the report’s recommendation that neither commissary closures nor the implementation of significant price increases be seen as viable budgetary solutions.

How often do you shop at your commissary? Would you shop there less if the prices were increased by 5 percent?

It’s All About Buying Power

As any savvy shopper knows, buying in bulk is a great way to save money. Buying in bulk is a great budgeting tool for individual consumers, but it also is the ace in the hole for large retailers like the commissary. Just like commercial grocers, DeCA leverage large-volume buying power in price negotiations with manufacturers and brokers.

Closing commissaries reduces DeCA’s buying power and reduces its ability to negotiate for the best possible pricing. Close too many commissaries and the significant decrease in volume could even eliminate DeCA’s ability to negotiate directly with manufacturers, forcing them into buying relationships with wholesalers and introducing a “middle man” into price negotiations.

In order for DeCA to offer our community the products and pricing we need and expect, significant decreases in volume must be avoided.

What About a Simple Price Increase?

Another alternative explored included the feasibility and impact of raising prices unilaterally above the cost-plus-five-percent level currently in place.

The report cited research in the Military Resale Study performed by the Boston Consulting Group in July 2015 which noted that polled commissary patrons indicated that “if prices increased even five percent, they would shop 25 percent fewer times per month.”

And while the finite impact of raising prices is difficult to quantify, if commissary sales decreased by 25 percent, the resulting loss of revenue would total nearly $2.1 billion. Additional price increases would then be needed, resulting in additional losses in sales, creating a vicious cycle of higher prices and decreasing sales until the commissary system became entirely defunct.

What if We Closed Them All?

Not only would closing all CONUS commissaries greatly impact moral, but it would create an even greater burden on already difficult budget constraints. The DoD report indicated that nearly 80 percent of all active duty families use the commissary at least once annually, with the greatest percentage of patrons utilizing services “two to three times per month.”

According to DeCA calculations, at this level of patronage, active duty families average just over $1,500 per year in savings. If the DoD were to compensate military families for this loss of benefit, the cost would be nearly $2.4 billion, a significant increase over the current projected budget shortfall. This analysis also fails to take patronage and sales to retirees and their families.

Commissary closures would also have several second and third order effects. AAFES exchange stores rely heavily on the proximity to commissaries to support their revenue.

AAFES estimates that between “20-30 percent of its foot traffic” and the resulting $1 billion in sales comes from exchange locations in close proximity to commissaries. Subsequently, the significant contributions to MWR funding made by AAFES would be greatly impacted.

And let’s not forget about our commissaries located OCONUS. These facilities derive great benefit from their connection to the stateside system.

Decreased buying power would greatly impact cost and availability of products that can make an overseas assignment feel a bit more like home.

According to report calculations, if all CONUS commissaries were closed, the resulting loss of buying power and management support would result in nearly a 25 percent increase in costs for OCONUS commissary operations.

We are by no means out of the woods when it comes to the future of our commissary benefits. The DoD is still examining options that include privatization or varied pricing to help DeCA achieve budget neutrality by the target date.

However, this report seems to solidify the DoD’s intent to ensure commissary benefits for active duty families and retirees remain in place and intact for as long as possible.

Since this report found that shutting down all the commissaries is the only way to operate them without taxpayer money, do you think privatization is the answer to reducing their operating costs? Why or why not?